Multiple Choice
Identify the choice that best completes the
statement or answers the question.
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1.
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What is the difference between a scarcity and a shortage?
a. | A scarcity occurs when producers will not or cannot offer goods or services at the
current prices, and a shortage occurs when there are limited quantities to meet unlimited
wants. | b. | Scarcity is the effort that people devote to a task that meets unlimited wants, and a
shortage occurs when supplies of goods or services run low. | c. | A scarcity occurs
when supplies of goods and services are suddenly attainable, and a shortage occurs when producers
will not or cannot offer goods or services at the current prices. | d. | A scarcity occurs
when there are limited quantities to meet unlimited wants, and a shortage occurs when a good or
service is unavailable. |
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2.
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Ben’s family purchased a dishwasher so that the family members could save
time for more productive activities. What kind of production factor is this?
a. | labor capital | c. | physical capital | b. | human capital | d. | efficiency
capital |
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3.
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According to the “guns and butter” example, if a country decides to
spend more on military goods, which of the following will happen?
a. | The country will have less money to devote to consumer goods. | b. | The country will
have an equal amount of money to devote to consumer goods. | c. | The country will be
forced to make trade-offs in military purchasing. | d. | The country will have more resources to devote
to consumer goods. |
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4.
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By the end of the summer, Jason had saved enough money for college from his job
as a waiter. He even had some money left over. Although he wanted both, he decided to buy a DVD
player rather than a digital camera. Which of the following is the opportunity cost in this
scenario?
a. | the DVD player | c. | college | b. | the digital camera | d. | the job |
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5.
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A legislative committee is weighing the pros and cons of a clean-air program. If
it spends $1 million on the program, the air will be cleaner by 20 percent. If it spends $2 million,
the air will be cleaner by 30 percent. If it spends $3 million, the air will be cleaner by 35
percent. After comparing opportunity costs and benefits at the margin, the committee agrees to fund
the program with $2 million. Why did it not choose to appropriate $3 million?
a. | At $3 million, the air is not improved as much as the committee would
like. | b. | At $3 million, the costs are no longer worth the benefits. | c. | It was too much to
spend without a guarantee. | d. | The air is improved by the same amount whether
$2 million or $3 million is spent. |
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6.
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Which of the following statements is true about the graph of a production
possibilities curve?
a. | The cost of producing watermelons and shoes is roughly even on the production
possibilities frontier. | b. | It costs 2 million more tons of watermelons to
produce 14 million tons of shoes. | c. | The cost of moving from producing no
watermelons to producing 8 million tons of watermelons is 1 million pairs of
shoes. | d. | One million tons of watermelons must be sacrificed to produce 8 million pairs of
shoes. |
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7.
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How does a society answer the three economic questions about the production and
consumption of goods and services?
a. | Its answer is based on the importance it attaches to various economic goals and
societal values. | b. | Its answer is based on the importance it attaches to the stock
market. | c. | Its answer is based on recent technological advances. | d. | Its answer is based
solely on current environmental regulation. |
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8.
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Which one of the following relies on habit, custom, or ritual to decide what to
produce, how to produce it, and to whom to distribute it?
a. | a market economy | c. | a centrally planned economy | b. | a traditional
economy | d. | a mixed
economy |
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9.
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In a free market economy, the factor market involves which type of
exchange?
a. | The goods and services that households produce are purchased by
firms. | b. | Firms purchase factors of production from households. | c. | Households purchase
factors of production from firms. | d. | Firms loan money to households to purchase
capital. |
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10.
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Self-interest is the motivating force driving the free market. Which of the
following is the regulating force?
a. | incentive | c. | competition | b. | group interest | d. | the invisible
hand |
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11.
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Centrally planned economies can work effectively toward explicitly stated goals,
but which of the following is one disadvantage of such a system?
a. | Its performance almost always falls short of its ideals. | b. | These economies
never produce an increase in output. | c. | The workers control all the production
factors. | d. | It gives too many rewards for innovation. |
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12.
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Which of the following statements is true, as market economies have evolved
since Adam Smith’s time?
a. | Government intervention in the economy has decreased. | b. | Government
intervention in the economy has become greater. | c. | Government intervention in the economy is based
on job safety. | d. | Government intervention in the economy has stayed relatively the
same. |
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13.
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China, like many other nations, is undergoing a period of transition in which
many of its state firms are being privatized. Which of the following statements BEST describes the
change in China’s mixed economy system?
a. | The economy is moving away from a market-based system toward a centrally planned
system. | b. | The private sector economy is being managed by state-appointed
trustees. | c. | The free enterprise system is placing limits on property taxes and enforcing trade
tariffs. | d. | The economy is moving away from central planning toward a market-based
system. |
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14.
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The purpose of the free enterprise system is to
a. | give consumers goods and services free of charge. | b. | eliminate economic
choices. | c. | create political campaign slogans. | d. | give consumers freedom to make economic
choices. |
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15.
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What are some of the basic principles of free enterprise?
a. | research institutions, government restriction, and stock
qualifications | b. | profit motive, legal equality, private property rights, free contract, and
competition | c. | interest groups, disclosure laws, public interest, and negative
regulation | d. | absolute organizations, low prices, and quality control
indexes |
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16.
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In which way does a public disclosure law help consumers?
a. | by allowing consumers to file grievances about products and businesses with the
government | b. | by requiring companies to give consumers important information about their
products | c. | by forcing companies to pay taxes based on the amount of goods and services they sell
or buy | d. | by requiring businesses to report business relationships that could constitute a
monopoly on the marketplace |
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17.
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Which of the following is a good indicator of economic stability?
a. | foreign policy | c. | general price levels | b. | general foreign trade | d. | job-related
safety |
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18.
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Which word BEST completes the following sentence? Improvements in _____ allow an
economy to produce more output from the same or a smaller quantity of inputs.
a. | GDP | c. | technology | b. | free enterprise | d. | communication |
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19.
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Which of the following is NOT a reason for the government to provide a good or
service as a public good?
a. | The good or service should be made available to everyone. | b. | Increasing the
number of consumers would increase the cost to a private provider. | c. | It would be
inefficient to exclude nonpayers. | d. | It would be impractical to make consumers pay
individually. |
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20.
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Improved technology helps create a higher standard of living for future
generations by
a. | preventing drastic shifts in general price levels. | b. | reducing the number
of unemployed workers. | c. | creating specialized jobs for
workers. | d. | providing additional goods and services. |
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